Yahoo zeroing in on space at Chronicle Building

Tech giant one of many in hot market

The Chronicle Building at Fifth and Mission could gain Yahoo as a tenant when Square vacates its space.

The Chronicle Building at Fifth and Mission could gain Yahoo as a...

Yahoo could soon become the newest tenant in The Chronicle headquarters and the latest tech giant to expand in San Francisco.

The news that Yahoo was zeroing in on the space was first reported by the respected industry blog All Things D. Industry sources confirmed advanced talks are under way and said Yahoo has been scouting the San Francisco office market for about 60,000 square feet for the last six months or so.

Terms of the deal are far from clear. But based on current market rates, a 10-year lease for that amount of space could add up to nearly $29 million.

Yahoo is just one of many tech companies competing in the scorching local market for increasingly limited space.

According to real estate sources, Zendesk is eyeing the market for about 125,000 square feet, just two years after doubling the size of its headquarters on Market Street. Practice Fusion is looking around for the same amount of space, Intuit is on the hunt for around 100,000 square feet, and Microsoft is scouting for about 60,000 square feet.

Yahoo's rival Google is also on the verge of expanding in the city. The search giant is close to finalizing a 10-year, 350,000-square-foot deal at Morgan Stanley's Hills Plaza building, according to Bloomberg. It would rank as one of the largest deals of the year.

Yahoo would take over the space at 110 Fifth St. being vacated by mobile payment startup Square, which is moving to 1455 Market St. around October.

Yahoo is apparently looking to upgrade and expand from its current sales office at 475 Sansome St. Like a growing number of Silicon Valley companies, it's also likely looking to provide more convenient commuting options for some of its San Francisco employees.

Yahoo would inherit space that Square remodeled extensively, turning an aging newspaper building into a slick startup facility. Meanwhile, Chronicle owner Hearst Corp. has been working with Forest City on an ambitious plan to redevelop the cluster of buildings and lots around the newspaper headquarters.

The total number of tech companies in San Francisco has swelled amid the boom in mobile and social startups. There are now more than 1,800 tech companies in the city, the most ever and up by more than 300 since the end of 2010, according to an analysis of state data by the CBRE Group.

Average asking rents are up 6.4 percent from a year ago, as vacancy rates dipped to 8.6 percent last quarter and sublease space approaches all-time lows, according to the second quarter report by brokerage firm Cassidy Turley.

In fact, demand now outpaces supply in San Francisco. There are at least nine companies looking for more than 100,000 square feet of space, but only five blocks of that size that could be available in the next 12 months, Cassidy Turley reported.